Equity method of accounting for Associates

CFA Level II FRA
#1

Hi All

Was going through the FR - Accounting for Associates - In the section on problems with the Equity method which an analyst should keep in mind - there was a section on the leverage ratios being impacted by the Equity method

Now do they mean the Total Assets (which includes Debt and Equity) to Equity of the investor being affected by the inclusion of the investment in associates?

Or are they referring to the Debt to Equity Ratio - if it is the latter, can some one explain why that is impacted?, I can only think of inclusion of earnings of the Associate which ultimately forms a portion of the Equity of the Investor

Thanks

QuantMan2318

#2

Any help on this please?

#3

Unless specifically mentioned, leverage = D/E